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Ulviyya Poladova

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As the summer of 2026 unfolds, Europe finds itself in an increasingly precarious energy position that few analysts anticipated even six months ago. Despite the absence of winter heating demand and the seasonal lull in consumption, natural gas and liquefied natural gas (LNG) prices on global markets remain stubbornly elevated, hovering at levels typically reserved for peak winter months. The European benchmark TTF hub sits at approximately $716 per 1,000 cubic meters, while broader European market prices hover near $700. These figures would be alarming in January. In July, they are unprecedented in the post-2022 era and signal structural vulnerabilities that extend well beyond cyclical market dynamics.

The current price surge is primarily attributable to the renewed escalation of military tensions between Iran and the United States in the Gulf region. This conflict has disrupted LNG shipping routes, elevated insurance and freight costs, and introduced a persistent risk premium into every molecule of gas traded on the global market. Even if hostilities were to cease immediately, the Middle Eastern LNG-exporting nations would require considerable time to restore damaged infrastructure and re-establish stable transportation corridors. The market, anticipating this lag, has already priced in months of constrained supply.

Perhaps the most concerning metric is the rate at which European underground gas storage facilities (UGS) are being filled. According to data from Gas Infrastructure Europe (GIE), July's average injection rate was among the lowest recorded since 2011, surpassed only by the notably weak years of 2020 and 2024. As of mid-July 2026, European storage facilities stand at approximately 53.67% capacity - 15.59 percentage points below the five-year average for this date, and a stark contrast to the 64.4% recorded at the same point last year.

No single European country has exceeded 55% storage capacity. The largest storage holders reveal the depth of the problem. For instance, Germany sits at 45.2%, France at 52.6%, Austria at 58.3%, Italy at 72.2%, and the Netherlands at a concerning 32.4%. Total reserves currently stand at 58.7 billion cubic meters, roughly 12 billion cubic meters less than the same period last year.

Since the start of the injection season in April 2026, EU member states have injected a net volume of just over 28 billion cubic meters into underground storage. This represents only 41% of the volume required to meet the European Commission's mandatory targets. Under current EU regulations, member states must ensure their storage facilities are at least 90% full between October 1 and December 1, with a 10% flexibility allowance in difficult filling conditions. To meet even the minimum requirement of 80%, Europe would need to inject at least 68 billion cubic meters of net gas before the heating season officially begins.

At current injection rates, achieving this target appears increasingly unlikely. If the trajectory continues, European storage may reach only 70–75% capacity by the traditional onset of autumn-winter demand - historically considered the absolute minimum for a heating season, and dangerously close to the threshold below which supply security becomes genuinely threatened.

The geopolitical dimension of Europe's gas crisis is layered with contradictions. European media has reported that some member states have raised the possibility of resuming natural gas imports from Russia.

Yet even if the EU were to lift sanctions tomorrow, Russian gas exports would not resume in the near term. More practically, much of the pipeline infrastructure previously used to transport Russian gas to European markets has been damaged or destroyed during the hostilities, making rapid restoration virtually impossible.

According to the Financial Times, EU member states imported 9.89 million tonnes of Russian LNG worth approximately €6 billion during the first six months of 2026 - an 18% increase compared to the same period in 2025.

The persistent energy costs are placing mounting pressure on European budgets. Governments that anticipated a normalization of energy prices are now confronting the need to redirect funds allocated for other priorities. The timing could hardly be worse, as energy shortages are already constraining economic growth across the continent, limiting the fiscal space available to absorb these unexpected expenditures.

The continued dependence on external energy supplies highlights Europe’s ongoing vulnerability. Rising energy costs are placing additional pressure on national budgets, while expensive imports are limiting economic growth by increasing costs for businesses and consumers.

Against this backdrop, Azerbaijan's role as a reliable gas supplier to Europe has grown substantially. Earlier, President Ilham Aliyev has emphasized that the European market remains a priority for Azerbaijan, and demand for Azerbaijani gas continues to increase.

Azerbaijan currently exports gas to 16 countries and ranks among global leaders in pipeline gas supplies. The Southern Gas Corridor, which transports Azerbaijani gas through Georgia, Türkiye, and into Southern Europe via the Trans-Adriatic Pipeline (TAP), has proven to be one of the most resilient supply routes for the EU in recent years. While it cannot fully replace the volumes previously supplied by Russia, its reliability has made it an increasingly strategic asset.

Azerbaijan is also positioning itself for the next phase of Europe's energy transition. The country is developing substantial renewable energy projects and aims to export up to 8 gigawatts of electricity generated from renewable sources by 2032.